House Acts on Saving Enhancements; Ball Now in Senate’s Court

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True to the promise of its GOP leaders, on September 27, 2018, the House of Representatives passed the Family Savings Act of 2018 (FSA-2018), legislation that would make many significant changes to retirement and other tax-favored savings arrangements. The path forward for this legislation is shrouded in uncertainty. FSA-2018 was proposed as one in a trio of bills collectively known as “Tax Reform 2.0.” However, the combined legislative package includes a potentially unpopular provision that makes 2017 individual income tax cuts permanent (see “President Trump Signs Tax Reform Bill Into Law” for more information on the tax cuts). This provision has almost no chance of being passed by the U.S. Senate due to procedural rules that make the razor-thin Republican majority there insufficient for passage. FSA-2018, however, has momentum of its own.

Where to From Here?

The most viable path for FSA-2018 to become law is to be considered on its own merits by the Senate. There, legislation that proposes similar—but not identical—enhancements to savings arrangements was introduced in March in the Retirement Enhancement and Savings Act of 2018 (RESA) (see “RESA’s Return May be Departing Senator’s Gift to Retirement Readiness” for more information on this proposed legislation). These Senate and House bills share some key provisions, including two that would

  • liberalize rules for employers to participate in a common retirement plan with other employers, historically referred to as multiple employer plans, or MEPs; and

  • encourage use of lifetime income investments in retirement plans.

It would not be surprising if House and Senate leaders ultimately negotiated a common bill with “best-of” provisions from both FSA-2018 and RESA. Other legislation—tax provision extensions, for example—could also serve as a vehicle for Congress to consider these or similar savings enhancements.

So Little Time, and Yet …

The scheduled time remaining in the 2018 session of the 115th Congress is now being counted in days, rather than weeks or months. Add to this the major distraction of campaigning for the November midterm elections for many lawmakers, and the prospects for enacting all but the most pressing legislation seem doubtful. But there remains the possibility of cooperative House-Senate action on retirement security, especially during the “lame duck” period following midterm elections. Because of closely contested races that could alter the balance of power in Congress, and the retirement of key lawmakers, this window of opportunity could be seized.

Last Minute Changes to FSA-2018

While most provisions of FSA-2018 remain unchanged from the Ways and Means Committee’s approval on September 11, 2018 (see “Tax Reform 2.0 Continues Lawmakers’ Push for Savings Enhancements” for specifics), a limited number of provisions were changed before passage by the full House membership on September 27. They include the following.

  • FSA-2018 would provide employers a fiduciary safe harbor for selecting an insurer that offers annuity contracts with a lifetime income option for plan participants and beneficiaries. Key to being insulated from liability would be the financial condition of the insurer, and the suitability of cost, features, and benefits of the annuity.

  • Internal Revenue Code Section (IRC Sec.) 529 education savings accounts could be established not only after birth—as in current law—but also when a child is “in utero;” meaning, after conception but before birth.

  • A proposed study of the Pension Benefit Guaranty Corporation’s pension plan insurance program and its premiums was eliminated by the House Ways and Means Committee before the final House vote.

Stay Tuned

As noted previously, the best chance for enactment of the savings enhancements in FSA-2018 may lie in cooperative effort between the House of Representatives and the Senate. The provisions in FSA-2018, and others in Senate-sponsored legislation—notably RESA—have significant bipartisan support.

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